Proposition 65 passed by a large margin in 1986. Many referred to it then as the “Attorney Full-Employment Act.” The essence of it is that consumers must be warned of any unsafe elements in their water, food or even air, assuming the unsafe element is known. And if it’s unknown or if unsure, either legislative action or lawsuits follow.
A recent lawsuit was filed by the Environmental Law Foundation against Dole Food Co. and the Gerber Baby Food division of Nestle (both deep-pocketed defendants). The accusation is that the companies are allowing unsafe levels of lead in baby food, fruit and fruit juices. Naturally, the defendants answer that plaintiffs have overstated the amount of lead in food, that much is naturally occurring and that the Environmental Law Foundation has made the false assumption that kids eat the same food multiple times on a daily basis, thereby increasing the lead in their system.
In an expected drawn-out trial, the defendants have illustrated that the stakes are huge for all businesses in California or any business across the nation that delivers food into California. Every food will have to be re-labeled, labels will change constantly, business practices will change, new deleterious elements will be found, interpretations of negligence will change, and as was said by one of the defendant’s attorneys, “A jar of baby food is going to pay for that.”
Sadly, the state is already paying big since Proposition 65 signs are posted virtually everywhere – gas stations, parking garages, office buildings, restaurants, grocery stores, etc. – warning about dangerous chemicals in air on the premises. Even if nothing is suspected, buildings are signed simply to lower risk of lawsuits.
Surprisingly, the California law actually conflicts with federal law. Last February the U.S. Food & Drug Administration sent a letter to the Washington State Agriculture Department saying Proposition 65 warnings for lead are “unnecessary and would inaccurately portray the foods as a health risk,” according to a legal brief filed in the Dole/Nestle trial. The Environmental Law Foundation attorney responded that the FDA letter to Washington State was inadmissible in the California trial.
Personally, I began worrying about the direction of California 30 years ago, and that was one factor which precipitated the sale of our food business to Dole Fruit Co., one of the defendants in the lead contamination lawsuit. Not only was litigation driving our worry, but also the cost of compliance with hundreds of unique California laws was making any California company noncompetitive with others around the U.S.
After the sale of our business, I joined a merger/acquisition and venture capital company with the proviso that we could move our family anywhere in the West. However, because most of my business was in the food industry and most clients in California, we remained there for 12 more years, and even after moving to Idaho, monthly business trips continued.
During those years, I served on nine different corporate boards of directors, which “enabled” me to be a defendant in seven lawsuits over many years. The worst was when we sold a public food company headquartered in California for a 106 percent premium to the stock market price, and within two weeks there were four class-action lawsuits filed against the buyer, the seller and all members of the board individually, with hundreds of claims asserted, most claiming we “gave the company away.”
Seven months and almost $700,000 later, the buyer decided to settle for a fraction of the claim, and then two of the law firms sued each other to determine who would get most of the settlement. The shareholders, for whose benefit the suit was filed, got zero.
Living in Idaho is an absolute blessing, not only because of a gorgeous state with relatively few inhabitants, but also because we have a state government that can watch what goes on in California and other sick jurisdictions, and hopefully will prevent imitation. Knowledge is power, and we generally learn more from others’ mistakes than from their successes. Repeating those mistakes would qualify as a definition of stupidity.
Chas has worked for the past four years in the agriculture management and investment business. Before that, he spent 20 years in his own merger/acquisition business in Fresno, Calif., after 25 years in the dried fruit business, also in California.